With the Series E financing round the company achieves “unicorn” status with a $1.6 billion valuation as data-intensive AI and generative AI applications boost demand for the company’s software.

Data management platform developer WekaIO has raised $140 million in an oversubscribed Series E round of funding that boosts the company’s valuation to $1.6 billion, the company said Wednesday.

WekaIO said in a statement that the funding will “augment the company’s considerable cash reserves” and provide “ample options” for scaling up its business to meet what it described as “accelerating global demand” for its AI-native data infrastructure.

The additional funding will also allow the Campbell, Calif.-based company to expand development work on its data platform software and provide “liquidity to Weka employees.”

[Related: Weka Launches Channel Program, Enlists Partners For Expansion Into AI/ML]

The funding round comes at a time when the increased need for huge volumes of data spurred by the explosion of data-hungry AI and generative AI applications is driving demand for the Weka Data Platform.

The company said that more than 300 of the world’s largest AI and GPU deployments are running on the WekaIO system. WekaIO was recently named to the 2024 CRN AI 100 List.

“The recent acceleration of generative AI and enterprise cloud adoption has triggered a sharp increase in customer demand, driving an unprecedented number of eight-figure ARR deals—an impressive feat when you factor in that WEKA is a software-based business,” said Intekhab Nazeer, WekaIO’s chief financial officer, in the statement. “It was an opportune time to fortify our cash reserves, allowing our investors to increase their position in the company while minimizing share dilution for our employees.”

Valor Equity Partners, a previous investor in WekaIO, led the round – which WekaIO said consisted of a combined primary and secondary transaction. Along with Valor, other existing investors that participated in the round and increased their positions in the company included General Investment management, Nvidia, Atreides Management, 10D, Hitachi Ventures, Ibex Ventures, Key1 Capital, Lumir Ventures, MoreTech Ventures and Qualcomm Ventures.

“The continued backing of this preeminent group of investors speaks volumes: WEKA is building something truly transformative that modern data-driven organizations need now, more than ever,” WekaIO co-founder and CEO Liran Zvibel said in the press statement.

“We are grateful to our returning backers for their support and are honored to welcome [Valor founder, CEO and chief investment officer] Antonio Gracias to our board of directors,” Zvibel said. “Antonio has played a pivotal role in helping build some of the world’s most innovative and disruptive companies. We look forward to collaborating with him as we scale to create new value for WEKA’s customers, partners, and shareholders.”

“We will deliver innovation at an unprecedented pace and scale to organizations around the globe,” Cisco CEO Chuck Robbins said on Wednesday’s earnings call.

Cisco Systems CEO Chuck Robbins plans to leverage “Cisco’s robust partner and customer ecosystem in markets where Splunk had limited or no presence” to grow the business of his new security and observability subsidiary – and partner conversations have led Cisco to believe that its equipment consumption issues are coming to an end.

“With our unified platform approach, vast global partner ecosystem, and ability to support hybrid and multi cloud environments, we will deliver innovation at an unprecedented pace and scale to organizations around the globe,” Robbins said on the networking giant’s quarterly earnings call Wednesday.

Robbins’ employees are also at work “aligning our Cisco and Splunk sales forces and accelerating channel enablement processes for cross selling and upselling our combined solutions,” with about 5,000 customer accounts identified “who have the potential to become meaningful Splunk customers.”

“Our sales teams are already making those connections,” Robbins said.

[RELATED: Sharritts To Leave As Cisco Exec Shuffle Puts Former Splunk CEO In President Role]

Cisco Q3 Earnings

Scott Herren, Cisco’s chief financial officer, told analysts on Wednesday’s call – reporting earnings for the vendor’s fiscal 2024 third quarter, ended April 27 – that the vendor could see operational costs grow in fiscal year 2025 due to new channel enablement resources and new training for the Cisco and Splunk sales teams.

Herron said this won’t be “a substantial ramp up” in integration investment.

“There is investment that goes along with that integration, and fiscal ‘25 is the year we’ll do that,” Herron said. “This wasn’t a deal that was motivated by cost synergies. It was much more motivated by revenue synergies. … We will see those revenue synergies begin to ramp in the second part of fiscal ’25 as these are not short sales cycles, as we get our team ramped up on how to sell Splunk, as we get the Splunk team ramped up on how to sell Cisco, and as we get our channel fully enabled to sell that.”

Splunk’s Q3 Assistance

Some of Splunk’s benefits to Cisco already came through in the quarterly revenue numbers, with the Splunk deal closing in March during the third fiscal quarter, ahead of schedule.

Cisco, headquartered in San Jose, Calif., recorded $12.7 billion in revenue during the quarter, down 13 percent year over year, in line with the vendor’s expectations, according to Cisco. Splunk contributed $413 million in revenue.

The vendor saw $6.9 billion in total subscription revenue, including Splunk, up 12 percent year over year. Without Splunk, subscription revenue grew 5 percent year over year.

“We have transformed our business model with revenue from subscriptions now accounting for more than half of our total revenue, even before the addition of Splunk,” Robbins said on the call.

With Splunk, total software revenue grew 5 percent to $4.5 billion. Software subscription revenue grew 17 percent. Without Splunk, total software revenue was down 4 percent year over year, and software subscription revenue was up 6 percent year over year, Herren said.

Total annualized recurring revenue (ARR) was $29.2 billion, up 22 percent year over year. Splunk contributed $4.2 billion. Cisco’s Splunk-less ARR grew 5 percent year over year.

Cisco’s product ARR was $15.5 billion, up 44 percent year over year. Product ARR without Splunk was up 9 percent year over year.

Including Splunk, security product sales grew in revenue by 35 percent year over year and observability sales were up 27 percent. Cisco’s ThousandEyes network services helped observability grow, Herren said.

Product orders in the quarter grew 4 percent year over year. Without Splunk, orders were flat.

Robbins pointed to product order growth in the quarter for two of Cisco’s largest product portfolios – data center switching and campus switching – as well as product order growth in security and collaboration offerings. Robbins said data center switching revenue grew in the mid-teens, “so customers are investing in these private data centers.”

Security product orders grew by high single digits, Robbins said.

Splunk Opportunity Ahead

Robbins told analysts on the call that a unified Cisco and Splunk platform should “revolutionize how customers connect and protect their organizations, using data in new ways to enhance their entire digital footprint.”

Gary Steele, the former CEO of Splunk who now serves as Cisco’s president of go-to-market (GTM), told analysts on the call that Cisco has launched financial incentives and sales promotion incentive funds (SPIFFs) to motivate Cisco sellers in bringing Splunk to those 5,000 Cisco accounts. Steele put the sales cycles for that effort at six to nine months.

“You’re not going to see that immediately,” he said. “But that work is happening.”

The Cisco and Splunk sales teams are also “working together to more broadly penetrate accounts,” Steele said. “You’ll start to see that in the first half. But it’s going to layer in. You’re going to see more momentum as we get to the middle part of the year.”

When asked by an analyst about Palo Alto Networks’ plan to buy IBM’s QRadar assets, Steele said he is confident in Cisco-Splunk’s security information and event management (SIEM) market position and pace of innovation.

“While, yes, it is competitive, we feel like we’re incredibly well-positioned to continue to drive very important innovation,” he said. “We’ve also taken a very different approach than our competitors. And we think broadly about – how do you bring together on a single platform the security capabilities that customers want broadly all the way through observability. And it’s very difficult across the industry to see anybody taking the position that we have and driving value.”

When asked about plans to change Splunk’s pricing, Steele said he has no plans for “fundamental change” in that strategy.

“We’re very much focused on driving very good adoption across our customer base and ensuring that they feel like they’re getting value every day,” Steele said. “And the capabilities that we’re offering are hard to match in the industry. So we’re not shifting gears from a pricing point of view.”

Cisco and Splunk’s security announcements during the cybersecurity industry’s recent RSA Conference 2024 were “just the start of the elements of integration that we can deliver that will ultimately drive growth for the security portfolio broadly, but also Splunk,” Steele said.

We’re going to demonstrate to the industry that we can continue to innovate at a rapid pace as a combined business,” Steele said. “And we feel like we’re on a really good track to do that.”

Although Cisco has plans to reveal more integration updates during its Cisco Live 2024 event in June, “Our intent is just to continue pushing innovation out,” Robbins said.

Excluding Splunk, Cisco’s security revenue grew 3 percent and observability grew 14 percent. Within security, Cisco’s zero trust offering grew by double digits, Herren said.

And that growth for non-Splunk Cisco security was “the highest it’s been in probably a couple of years,” Robbins said. “We’re seeing the traction on these new products. They’re just ramping. They are new customers. They are testing. They’re implementing.”

$1B In AI Product Orders Expected

Cisco’s recent design awards based on its 51.2-terabit G200 Silicon One processor has helped to reinforce “confidence in our line of sight to $1 billion of AI product orders in fiscal ’25,” Robbins said.

That $1 billion “is not some aspiration that we have to go find,” Robbins explained. “We didn’t set a $1 billion target and tell people to go find deals. There are deals behind the billion. They are actual wins that we either have already won or we have a high degree of confidence that we will win.”

The timing for that AI opportunity, however, depends on the pilot stage, testing on power consumption and other factors, he said. “My suspicion is that that’s going to start low at the beginning of the year and it’ll ramp as we get through the year,” Robbins told analysts on the call. “So I’d be thinking more back half. But we’ll have to see how these pilots go. … We’ll know more in the next 90 days.”

Robbins said that so far the AI opportunity “is largely driven by web-scale infrastructure” with Cisco “beginning to see enterprise pipeline materialize.”

“We’re beginning to see some enterprise use cases, but it’s predominantly backend in the hyperscaler space,” Robbins said. Cisco has also seen AI opportunities in both systems and optics and even some standalone Silicon One opportunities.

During a global advisory board meeting with about 60 customers, Robbins said, one customer said that “they’re all still trying to figure out exactly what their use cases are and how the architecture is going to play out. So I’d say it’s still super early on the enterprise side.”

“We believe we are well positioned to be the key beneficiary of AI enterprise application proliferation with the breadth of our portfolio and the vast amounts of data we see,” he said. “As our customers adopt and deploy AI, they need the infrastructure to power it, the data to develop it and the security to protect it. And we believe only Cisco can deliver and integrate all three.”

On the call, Steele also highlighted Splunk’s history in machine learning (ML). The company has amassed about 250,000 users of its Machine Learning Toolkit. It has seen traction with its proprietary Search Processing Language and has been working on introducing more generative AI (GenAI) and AI capabilities into its products. Splunk will leverage Cisco networking datasets to improve its assets.

“The data and insights that we have as a combined entity, I think, are second to none in terms of the competitive environment,” Steele said.

Deployment Woes Wane

Robbins and the other Cisco executives on the call were upbeat on customer product deployments improving “based on activations to the cloud, which we track, as well as conversations with our customers and partners.” However, customers are still “ruthlessly prioritizing their IT investments” amid high inflation.

“We believe that the products customers have on hand are being steadily deployed in line with the expectations we laid out last quarter, meaning we currently expect customers to complete the installation of the majority of their inventory by the end of our fiscal year in July,” Robbins said. He described Cisco’s “core product portfolio” as “turning toward normalization as we continue to see customer deployments of shipped equipment progress.”

Robbins said he expects demand to start normalizing in the first quarter of fiscal 2025, with global events such as the U.S. presidential election a potential factor in determining demand.

“I’m pleased that we’re getting to the tail end of this supply chain situation that we’ve been navigating for the last several years, on-track to get this consumption issue behind us as we enter FY ’25.,” Robbins said.

Telecommunications and cable customer demand was “muted worldwide,” Robbins said. But Cisco was “encouraged to see early signs of stabilization and improved performance in web-scale in terms of pipelines and orders.”

In the web-scale business, Cisco saw “three of the top four hyperscalers deploying our Ethernet AI fabric, leveraging Cisco validated designs for AI infrastructure,” Robbins said.

Q3 In Detail

Net income was $1.9 billion using generally accepted accounting principles (GAAP). Operating expenses grew 15 percent year over year, hitting $6.1 billion. Operating income was $2.2 billion, down 44 percent.

Cisco reported $4 billion in cash flow from operating activities in the quarter, down 24 percent year over year. The company had $18.8 billion of cash on hand at the end of the quarter.

All geographies were down year over year during the quarter, with sales in the Americas down 15 percent. Cisco’s remaining performance obligations (RPO) was $38.8 billion, up 21 percent year over year. Cisco expects more than half of that to become revenue over the next 12 months.

By customer market segments, service provider and cloud revenue was up 10 percent, public sector up 6 percent and enterprise up 2 percent, Herren said.

Product RPO grew 29 percent year over year. Total short-term RPO was $20.1 billion, up 19 percent year over year, Herren said. Without Splunk, RPO was $35.3 billion, up 10 percent year over year. Product RPO grew at the same amount while Service RPO grew 14 percent.

Networking, the vendor’s largest product category, fell 27 percent and collaboration product revenue was flat, according to Cisco.

Herren attributed the networking decline to “continued implementation of inventory by our customers” with the year-ago fiscal 2023 third quarter benefiting “from significant shipments of excess backlog.” The collaboration unit saw cloud calling and contact center offerings grow and meetings and devices decline, Herren said.

Cisco’s stock traded just above $52 after hours, up nearly 5 percent in after-hours trading.

Future Revenue Guidance

Cisco expects to see $13.4 billion to $13.6 billion in revenue in the fiscal 2024 fourth quarter. For the entire fiscal year, Cisco expects total revenue of $53.6 billion to $53.8 billion.

Splunk should contribute $950 million to $1 billion in revenue, Herren said. For fiscal year 2025, Cisco predicts revenue growth “in the low- to mid-single digit range” and interest from the Splunk acquisition to turn into a headwind of about $350 million a quarter.

Cisco will also have to invest in operational expenditures to drive “revenue synergies” with Splunk, Herren said, with fiscal year 2025 operating margins in line with fourth-quarter expectations.

The companies say they will ‘facilitate the migration’ of QRadar SaaS customers to Palo Alto Networks’ Cortex XSIAM platform once the deal closes.

Palo Alto Networks said Wednesday that it has reached a deal to acquire IBM’s QRadar software-as-a-service assets, as part of the cybersecurity giant’s drive to bring more customers onto its Cortex XSIAM platform.

Terms of the deal weren’t disclosed. It’s expected to close by the end of September.

[Related: Palo Alto Networks To ‘Change How Cybersecurity Is Done’ With AI Launch: CPO Lee Klarich]

XSIAM (extended security intelligence and automation management) is Palo Alto Networks’ AI-powered platform for security operations teams, which competes with SIEM (security information and event management) products and debuted in late 2022. IBM, meanwhile, launched its new QRadar Suite for security analysts a year ago.

The companies said Wednesday they will “facilitate the migration” of QRadar SaaS customers to Palo Alto Networks’ fast-growing XSIAM platform once the acquisition closes.

The deal was the second security operations consolidation deal announced just on Wednesday, following the disclosure earlier in the day that SIEM vendors LogRhythm and Exabeam plan to merge.

The planned acquisition also follows Cisco’s $28 billion acquisition of SIEM stalwart Splunk and growing competition in the market from vendors including Microsoft and CrowdStrike.

In a news release, Palo Alto Networks said the planned acquisition of IBM’s QRadar SaaS assets will include rights to QRadar intellectual property.

“Upon closing, Palo Alto Networks and IBM will facilitate the migration of QRadar SaaS clients to Cortex XSIAM,” the companies said in the release.

On-premises QRadar customers “who wish to remain on QRadar on-prem will continue to receive IBM features and support including security, usability and critical bug fixes, as well as updates to existing connectors and the ability to expand consumption,” IBM said in the release. “For both QRadar SaaS and on-prem clients who chose to migrate to Cortex XSIAM, the companies, along with their ecosystem of business partners, will closely collaborate to enable a smooth transfer, with IBM and Palo Alto Networks offering no-cost migration services to qualified customers.”

Additionally, as part of the deal, Palo Alto Networks will make “incremental payments” to IBM “for QRadar on-prem clients who choose to migrate to the Cortex XSIAM platform.”

The QRadar acquisition deal was disclosed among a number of announcements made Wednesday by Palo Alto Networks and IBM, related to their expanded partnership.

Other moves announced by the companies Wednesday included that Palo Alto Networks will integrate IBM’s watsonx Large Language Model technology into XSIAM, while IBM will train “more than 1,000” security consultants around activities related to Palo Alto Networks offerings, such as adoption, migration and deployment of the vendor’s products.

Additional components of the expanded partnership include the planned opening of a joint Security Operations Center by the companies. And IBM now aims to “drive a significant security book of business with Palo Alto Networks” as well, the company said in the release.